In skills and productivity, the Northern Powerhouse looks more like eastern Europe

Sofia, Bulgaria: A dead ringer for Sheffield. Image: Getty.

One of the most striking findings of the Centre for Cities' recent Competing with the Continent report is that most UK cities lag behind European counterparts in terms of productivity. That's a trend particularly evident in the Northern Powerhouse region, where all 21 cities are below the European urban productivity average of £56,300 Gross Value Added per worker, and all but two (Leeds and Warrington) are among the 25 per cent least productive places in the continent.

Indeed, as the map below shows, productivity in northern cities is closer to that of places in the east of Germany and eastern Europe, than to that of cities in the Greater South East of the UK, most of which perform above the continental average.

This highlights the scale of the task ahead for the Government in achieving the primary aim of the Northern Powerhouse initiative – building a powerful network of cities capable of counterbalancing London’s weight and influence.

The outlook for Northern cities appears even more challenging when we take a more detailed look at how their economies compare to European counterparts. Here are three big conclusions that can be drawn from our data:

The Northern Powerhouse’s largest cities are being out-performed by most western European cities.

Leeds is the most productive place in the north, but is ranked 239th out of 330 places in Europe with an average economic output of £46,600 per worker. That's 22 per cent lower than in Essen (£59,470 per worker), the European city which has the most similar economic structure to Leeds, and closer to Poznan (£47,300).

Manchester fares even worse, with an average economic output of £43,600 per worker – significantly lower than its most similar European counterpart, Hamburg (£67,100), and roughly the same productivity as Vilnius (£43,800).

Most northern cities are home to significantly more low-skilled residents than European competitors.

One of the aims of the Northern Powerhouse initiative is to secure more investors and businesses for places in the region, whether nationally or internationally. The availability of a skilled labour force is a key factor in where firms choose to locate.

Yet northern cities are performing poorly on this front compared to competitors across western and eastern Europe. All northern cities bar York are home to a higher share of low-skilled residents (i.e. those with less than 5 good GCSEs as a highest level of education) than the European city average (25 per cent).

In Hull, 43 per cent of residents are low-skilled, ahead of Liverpool (40 per cent) and Leeds (32 per cent). This is similar to the share of low-skilled residents in Polish cities, and more than twice as high as in cities in eastern Germany, Estonia, Lithuania, Hungary and Bulgaria:

Higher labour costs in UK cities could potentially make cities in Eastern Europe more attractive to firms to invest in than Northern Powerhouse cities.

Labour costs in UK cities are roughly three times higher than in Poland and Hungary, and about six times higher than in Bulgaria. So while northern cities are home to large shares of low-skilled workers, their relatively high labour costs mean that they are not well-placed to compete with eastern European cities for globally mobile low-skilled jobs.

Instead, Northern cities need to focus primarily on becoming attractive places for high-skilled businesses – particularly in the knowledge-intensive services sector – if they are to be successful.

It’s all about skills

These findings demonstrate the scale of the challenge that national and city leaders face in helping northern cities overtake eastern European counterparts, as well as start to catch up with places in the south east of England. Above all, they highlight the central importance of improving skills in northern cities at all levels – from early years to GCSE attainment, academic and vocational qualifications. 

Doing so will be vital in ensuring places across the north are well-placed to compete with European counterparts for the high-value businesses and jobs which offer the best prospects of long-term growth and prosperity.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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Can you have capitalism without capital? Brighton, Ankara, Ghent and the intangible economy

The Fusebox, Brighton. Image: WiredSussex.

As you head north out of Brighton on the A23 things take a distinctly granular turn. The cool bars and trendy eateries give way to second-hand shops and nail bars.

Looming over the area, New England House, an eight-storey brutalist office block, is home to Wired Sussex, a collection of digital and media companies, as well as its offshoot The Fusebox. Here, a collection of entrepreneurs, tech visionaries and creative technologists are seeking to transform their ideas into successful businesses. This island of cutting-edge thinking, surrounded by the evidence of the glaring consequences of austerity, could stand as a synecdoche for the suddenly vogueish concept of the “intangible economy”.

Towards the end of last year, on Radio 4’s Start The Week, Jonathan Haskel, author of Capitalism Without Capital, laid out the features of this brave new economy. The ideas are scalable, have sunk costs, their benefits spill over, and they have synergies with other intangible assets. All of these things are, to a greater or lesser extent, attributes featured in the virtual reality games, apps for care home workers, and e-commerce ideas mapped out by the bright sparks in the Fusebox.

Its manager, Rosalie Hoskins, explains that it exists to support the work of small companies doing creative work. Within these clean white walls they can bounce their ideas off each other and reap the fruits of collaboration. “We’ll provide the doors,” she says. But “it’s up to them to open them.”

One innovative thinker hoping to make her entrance is Maf’j Alvarez. She tells me she studied for a masters in digital media arts at the University of Brighton, and describes herself as an ‘interactive artist’. “Right now I am playing with virtual reality,” she tells me. “There’s a lot of physics involved in the project which explores weight and light. It definitely has a practical application and commercial potential. VR can be used to help people with dementia and also as a learning tool for young people.”

The Fusebox, she says, is “about collaboration. The residents of the Fusebox are in all a similar situation.”

The willingness to work together, identified by Haskell as a key element of the intangible economy, is evident in the Fusebox’s partnership with like minded innovators in Ankara. Direnç Erşahin from İstasyon, a centre for “social incubation” based in the Turkish capital, visited the Fusebox toward the end of last year.

“It was a good opportunity to exchange knowledge about the practice of running a creative hub – managing the place, building a community and so on,” he says.

Erşahin and his colleagues have launched a fact-checking platform – – which he believes will provide “access to true information”. The co-operation between the Fusebox in Brighton and İstasyon in Ankara  is “a good opportunity to reinforce a data-oriented approach and university and society interaction,” he argues.

But the interaction between wider society and the denizens of the intangible world is often marked by friction and, ironically, a failure of communication.

This point is underlined by Aral Balkan, who runs a company called which aims to develop ethical technologies. “There’s a good reason we have a trust problem,” he says. “It’s because people in mainstream technology companies have acted in ways that have violated our trust. They have developed systems that prey upon individuals rather than empowering them.”

A former Brighton resident, Balkan is almost a walking definition of Theresa May’s “citizen of nowhere”. He is a regular speaker on the TED and digital circuits, and I crossed paths frequently with him when I covered the industry for Brighton’s local newspaper. He left the city last year, chiefly, he tells me, in protest over the UK government’s overweening “snooper’s charter” laws.

He has Turkish and French citizenship and is now based in Malmö, Sweden, while working with the city of Ghent on a radical redevelopment of the internet. “Ghent is a beautiful example of how location affects the work,” he tells me. “They don’t want to be a smart city, they want to encourage smart citizens. We are exploring alternatives.”

Karl-Filip Coenegrachts, chief strategy officer at the City of Ghent, is another believer in the synergies made possible by the intangible economy. “The historic perspective has impacted on the psychology and DNA of the city,” he says. “The medieval castle built to protect the nobility from the citizens not the other way around. People in Ghent want to have their say.”

Left out of this perspective, of course, are those who cannot make their voice heard or who feel they are being ignored. The fissures are easy to find if you look. The future of Belgium’s coalition government, for example, is threatened by Flemish nationalists in the wake of a scandal over the forced repatriation of 100 Sudanese migrants. In Ankara, President Recep Tayyip Erdogan has purged local government and continues to stamp on any dissent.

In the UK, the gig economy makes headlines for all the wrong reasons. Back in the area around the Fusebox, the sharp observer will notice, alongside the homeless people curled up in sleeping bags in charity shop doorways, a stream of gig-worker bikers zooming from one order to another.

The intangible economy throws up all-too tangible downsides, according to Maggie Dewhurst, vice chair at the Independent Workers Union of Great Britain. She gives short shrift to the idea of ‘capitalism without capital’.

“It does get a bit irritating when they muddy the waters and use pseudo academic definitions. They pretend tangible assets don’t exist or are free.”

In fact, she adds, “The workers are a human resource.”